1. 1 Hydraulic Fracturing Regulatory Processes in Louisiana James H. Welsh Commissioner of Conservation

2. 2 Areas of Current & Potential Activity

3. Regulatory Goals Resource Conservation / Sustainability Waste Minimization Pollution Prevention Transparency Awareness / Surveillance 3

4. Regulatory Processes – Water Source Management / Evaluation – Work Permits – Well Construction Requirements – Waste Management / Disposal Requirements – Fracturing Fluid Disclosure – Inspection & Enforcement 4

5. Water Sources – Surface Water Use of surface water is encouraged. Cooperative Endeavor Agreements may be created through DNR – Office of Mineral Resources (OMR) for the use of running surface water. (Act 955 of 2010) Application process involves assessing the environmental/ecological impacts and economic benefits of surface water use. 5

6. Water Sources – Ground Water Notice is required prior to installation of new wells and prior to a change in use of existing wells for evaluation purposes. Orders may be issued to collect information, conduct metering, impose well spacing requirements, or limit production. Information may be used to establish areas of groundwater concern. 6

7. Water Sources – Other Certain E&P Wastes may be used as a frac fluid component in limited cases. Promotes both waste minimization and resource conservation. 7

8. Water Sources – Reporting Water sources and volumes must be reported for wells that are hydraulically fractured. Reporting is accomplished by filing Supplemental Page 3 of the Well History and Work Resumé Report (Form WH-1) following well completion. 8

9. Water Use Statistics Reported Usage from 10/1/2009 to 2/23/2012 Source Volume (Gallons) Frac Groundwater1,230,712,693 Frac Surface Water8,223,152,516 Drilling Rig Groundwater Supply879,649,632 Drilling Rig Surface Water Supply157,839,504 Other Groundwater155,545,829 Other Surface Water,39,007,638 Frac Stages22,338 Total Frac Water Used (gallons)9,453,865,209 Volume per Frac Stage (gallons)423,219 Average Frac Stages per Well11.4 Average Water Use per Well (gallons)5,454,777 Average Frac Water Use per Well (gallons)4,825,863 9 Water Usage Data for 1959 Haynesville Shale Natural Gas Wells

10. Work Permits A work permit application (Form DM- 4R) must be approved prior to conducting fracturing operations. Process allows for OC inspection of operations. 10

11. Well Construction Requirements Use of multiple cemented casing strings Minimum setting depth to protect USDW Post-installation pressure testing 11

12. Waste Management E&P Waste regulations ensure proper disposal to minimize environmental impacts of resource development. Manifest and reporting systems ensure transparency and accountability. Waste Management options include: – Onsite disposal – Well injection – Commercial disposal – Recycling in limited cases 12

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14. Fracturing Fluid Disclosure Types and volumes (in gal.) of hydraulic fracturing fluid List of additives used List of chemical ingredients subject to requirements of 29 CFR 1910.1200(g)(2) Maximum ingredient concentration within the additive Ingredients and concentrations of proprietary chemicals are not required. Required information may be reported to Frac Focus website. 14

15. Fracturing Fluid Disclosure Requirements by State 15

16. Inspection & Rule Enforcement 16 Periodic visual inspections of wells are conducted during all phases of development Regulatory violations result in the issuance of Compliance Orders to the responsible party requiring corrective actions. Possible enforcement actions include – Levy of Civil Penalties – Suspension of authority to sell oil – Withholding permits – “Orphaning” Declaration

17. STRONGER, Inc. is a nonprofit multi-stakeholder organization which measures state oil and gas waste management programs against a set of Guidelines developed and agreed to by all the participating parties. A Louisiana Review focusing on hydraulic fracturing regulatory practices was conducted in November 2010; Findings were issued in March 2011. Positive Assessments of Louisiana’s Regulatory Framework: – Proactive conservation of groundwater resource use. – Waste water recycling program. – Public outreach and education. – Waste disposal regulations. Areas for Improvement: – Updated Casing and Cementing Requirements. (IN PROGRESS) – More systematic training of Inspectors. (IN PROGRESS) – Require the reporting of hydraulic fracturing information including component constituents of frac fluid. (COMPLETED) 17 STRONGER Review

18. Potential Future Rule Changes 18 Frac Fluid Disclosure – Disclosure requirements tied to “Right to Know” federal law instead of OSHA safety communication rules. Casing and Cementing – Clear design objectives – Formation Integrity Tests – Cement evaluation following prolonged drilling – Liner seal testing – Cement top verification in limited circumstances